How is tax calculated on a non ISA share dealing account

longwalks1

hope this question makes sense.

I’ve got a S&S ISA that I’ve added the maximum to for the last 3 years, and have saved £20k (it’s currently sat in my normal dealing account, invested in ETF’s) ready to transfer into my ISA this new tax year in April.  

The dealing account is actually about £26k, built up since last April from a combination of savings, money owed to me and interest on my investments. 

I’ll transfer £20k straight into my ISA in April.
the remaining £6k I’ll hopefully add to again throughout 2025-April 2026 and do the same for the following tax year.

my question is, because I’ve been adding to my dealing account throughout the year (sometimes 2 or 3 deposits a month), and some is interest - how or who calculates any tax owed?  
Im a 40% tax payer in my job (hence me trying to get my savings into an ISA as quickly as I can) 

how is just interest calculated on my dealing account, and how is it collected?

anything I’ve missed please ask, just be interesting to know
thanks everyone 

masonic

It should be the same as a savings account, so your platform would report the interest to HMRC and if you complete a tax return you'd be required to declare it with your other interest. It would be worth checking any tax calculations carefully in case it is omitted, as you have a duty to report untaxed interest. Your provider should be able to display/send you statements of account activity which would include payments of interest on your credit balance.

kfm

longwalks1 said:

hope this question makes sense.

I’ve got a S&S ISA that I’ve added the maximum to for the last 3 years, and have saved £20k (it’s currently sat in my normal dealing account, invested in ETF’s) ready to transfer into my ISA this new tax year in April.  

The dealing account is actually about £26k, built up since last April from a combination of savings, money owed to me and interest on my investments. 

I’ll transfer £20k straight into my ISA in April.
the remaining £6k I’ll hopefully add to again throughout 2025-April 2026 and do the same for the following tax year.

my question is, because I’ve been adding to my dealing account throughout the year (sometimes 2 or 3 deposits a month), and some is interest - how or who calculates any tax owed?  
Im a 40% tax payer in my job (hence me trying to get my savings into an ISA as quickly as I can) 

how is just interest calculated on my dealing account, and how is it collected?

anything I’ve missed please ask, just be interesting to know
thanks everyone 

When you say interest on your investments do you mean capital gains?

masonic

...and is any of the "interest" actually dividends?

Reed_Richards

Exactly.  You could be receiving:

• Interest on cash etc held in the account
• Dividend income from shares etc held in the account
• Capital gains after selling investments in the account

All of these are potentially taxable.

longwalks1

kfm said:

When you say interest on your investments do you mean capital gains?

Sorry, yes I mean capital gains.  Are capital gains only calculated when a stock/ETF/holding is actually sold?  

For example I could have a ETF that I paid £10,000 for, and after 2 years its value has gone up to £15,000.  If I don’t sell it after 2 years, am I still liable for any tax on the increase in paper value?  As the following day it could halve in value

longwalks1

masonic said:

...and is any of the "interest" actually dividends?

I think some is actual dividends automatically reinvested, and some held in an Accumulation fund 

longwalks1

Reed_Richards said:

Exactly.  You could be receiving:

• Interest on cash etc held in the account
• Dividend income from shares etc held in the account
• Capital gains after selling investments in the account

All of these are potentially taxable.

Thanks Reed_Richards 
there’s very little cash held in the account (maybe £1000 ish, to cover any fees).  I’ll look into each fund/holding and see how the growth is paid to me.

eskbanker

longwalks1 said:

kfm said:

When you say interest on your investments do you mean capital gains?

Sorry, yes I mean capital gains.  Are capital gains only calculated when a stock/ETF/holding is actually sold?  

For example I could have a ETF that I paid £10,000 for, and after 2 years its value has gone up to £15,000.  If I don’t sell it after 2 years, am I still liable for any tax on the increase in paper value?  As the following day it could halve in value

Capital gains tax is only triggered when selling, so, given the ever-reducing annual allowance (now just £3K), you might consider tactical annual sales and repurchases (after 30 days or of other investments) in order to make use of this allowance and prevent a substantial CGT liability from building up.

longwalks1

eskbanker said:

Capital gains tax is only triggered when selling, so, given the ever-reducing annual allowance (now just £3K), you might consider tactical annual sales and repurchases (after 30 days or of other investments) in order to make use of this allowance and prevent a substantial CGT liability from building up.

Thank you eskbanker, I think that’s what I was trying to ask.  

My aim/plan is to be able to save £20k each year (in small deposits each month) into my dealing account so I have enough each April to move into my ISA. 

Do you know if I put away (hypothetically) £15k, it grew to £20k in value could I bed-and-ISA it to avoid any CGT?  

Apologies for all the questions 

eskbanker

longwalks1 said:

Do you know if I put away (hypothetically) £15k, it grew to £20k in value could I bed-and-ISA it to avoid any CGT?

Bed & ISA doesn't avoid CGT as such, in that the transaction itself is still a disposal for CGT purposes, but its value is in the future wrapping of that money....